Banking Giant HSBC Completes The First Yuan-Denominated Letter Of Credit Transaction On A Blockchain

Banking giant HSBC has revealed that they have finished the first yuan-denominated blockchain-based letter of a credit transaction with the help of Voltron. HSBC has partnered with the Landmark Group and the ReChainMe blockchain platform in order to create Voltron, which was used to arrange shipments between Hong Kong and Dubai.

Voltron is a consortium of eight banks which is leveraging R3’s Corda technology to digitize the LC process with the benefit of cutting the processing time and cost. The banks are HSBC, ING, Bangkok Bank, BNP Paribas, CTBC Holding, NatWest, SEB, and Standard Chartered. The group is looking to expand the number of banks involved.

The regional head of global trade and receivables finance for Asia-Pacific, Ajay Sharma said:

“We are hoping that we will have something by the end of the year, maybe the first quarter of next year, where will we know from Voltron what it costs, at which point, a lot of banks who might be sitting on the sidelines will be able to make a decision. Clearly we are hoping that through this technology, the unit cost of doing a transaction comes down, along with other benefits, such as speed.”

Sharma also noted that China is the world’s largest issuer of Letter of Credit (LCs) by value which is almost $750 billion in 2018. He said that digitizing this market will disrupt trade finance in China, reducing the amount of paperwork required to complete a transaction, shortening turnaround time and greatly lowering the cost of a trade.

To exemplify this situation, trading companies like China SDIC International Trade Nanjing Company have dealt with problems in paper-based transactions including the lengthy time needed in the exchange of documents, delays caused by amendments and lack of security and transparency. Using a blockchain platform like Voltron will help companies to enhance the security of the process as it enables authenticating the source of data and documents.